‘Transport.  Gen. 


f) 


The 

Twentieth  Century 


TALK 

at  the 

First  Saturday  Luncheon 
of  the 

Harvard  Club 

of 

New  York  City 


December  29,  1923 


U&mRY  OF  CONGRESS  Qtf?0 


^4-3  U 


By 

HOWARD  ELLIOTT,  C.  E.,  LL.  D. 

Chairman,  Northern  Pacific  Railway  Company 


Digitized  by  the  Internet  Archive 
in  2015 


https://archive.org/details/twentiethcentury00elli_1 


THE  TWENTIETH  CENTURY 

By  HOWARD  ELLIOTT 

Chairman.  Northern  Pacific  Railway  Company 


My  good  Harvard  friends:  A short  time  ago  my  name- 
sake, our  secretary,  told  me  that  the  Harvard  Club  was  to 
have  luncheons  on  Saturdays,  at  which  talks  on  subjects  of 
general  interest  would  be  made.  I think  this  plan  of  the 
Club  is  a good  one.  Mr.  Elliott  asked  me  to  be  the  first 
speaker.  I am  complimented  by  the  request  and  I thank 
you  sincerely.  In  this  busy  world,  it  is  rather  difficult  at 
times  to  get  out  of  one’s  “rut.”  These  luncheons  should  be 
helpful  in  arousing  renewed  interest  in  Harvard  and  all  that 
it  represents  in  the  life  of  the  nation. 

Harvard  has  had  and  still  has  a great  influence  for  good 
in  the  growth  of  the  United  States.  It  is  nearly  three  hun- 
dred years  since  Harvard  started.  Since  then  what  a mar- 
velous development  of  the  world  and  of  the  United  States 
has  been  unfolded ! 

The  nineteenth  century  has  come  and  gone.  The  first 
quarter  of  the  twentieth  century  is  nearly  behind  us.  We  are 
at  the  close  of  an  eventful  year.  It  is  well  to  look  back  a bit 
and  also  to  look  forward. 


Wonderful  Prog-  A hundred  years  ago  the  population  of  the 
ress  of  United  United  States  was  only  9,63 8,453  a°d  to- 
States-  day  it  is  over  107,000,000.  There  was 

then  no  “West”  as  we  now  know  it;  very 
little  mechanical,  chemical,  electrical  and  metallurgical  de- 
velopment; no  gigantic  manufacturing  enterprises;  no  far- 
flung  railroad  systems.  The  national  wealth  w'as  then  less 
than  $3,000,000,000  and  today  is  over  $300,000,000,000. 
Educational  and  charitable  enterprises  were  few  and  strug- 
gling; all  life  was  simple  compared  with  today.  The  extraor- 
dinary industrial  growth  of  the  country  began  especially 
after  the  Civil  War.  A few  figures  showing  the  expansion 
since  1870  are  interesting: 


3 


Statistics  of  Record  of  Progress  of  the  United  States — 1870  and  1920 


Ratio 

Item 

1870 

1920  1870:1920 

Wealth  : 

$30,068,518,000 

*$300,000,000,000 

1:10 

Wealth  per  capita  

779.83 

*2,839 

1:  3.6 

Public  debt,  less  cash  in 

treasury  (July  1)  

2,331,169,956 

24,330,889,731 

1:10 

Public  debt,  per  capita  ... 

60.46 

228.63 

1:  3.8 

Interest-bearing  debt 

(July  l)  

2,046,455,722 

24,061,095,361 

1:12 

Annual  interest  charge**.., 

118,784,960 

1,016,592,219 

1:  9 

Interest  per  capita** 

3.08 

9.55 

1:  3.1 

Total  money  in  circulation 

(July  1)  

676,284,427 

6,087,555,087 

1:  9 

Total  money  in  circulation 

per  capita  ( Tuly  1 ) 

17.51 

57.21 

1:  3.3 

Total  value  farm  animals 

1,518,465,000 

8,507,145,000 

1:  5.6 

PRODUCTION  OF  PRINCIPAL 

COMMODITIES 

Wool  (pounds)**  

162,000,000 

308,507,000 

1:  1.9 

Wheat  (bushels)**  

235,884,700 

787,128,000 

1:  3.3 

Corn  (bushels)**  

1,094,255,000 

3,232,367,000 

1:  3 

Cotton  (500  lb.  bales  gross 

weight)  

4,024,527 

12,987,000 

1:  3.2 

Rice  (pounds)  

54,888,880 

a 1,491,944,444 

1:27 

Sugar  (beet)  pounds 

b 806,000 

1,452,902,000 

1:1803 

Sugar  (cane)  pounds 

87,043,000 

244,250,000 

1:  2.8 

Gold  (dollars)**  

50,000,000 

b 49,509,400 

1:  1 

Silver  (dollar-com.  value)  . 

16,434,000 

57,420,325 

1.  3.5 

Aluminum  (pounds)**  ... 

41,375,000 

Cement  (barrels)**  

96,944,000 

Coal  (long  tons)**  

29,496,054 

576,431,250 

1:20 

Copper  (long  tons)** 

12,600 

539,759 

1:43 

lead  (short  tons)** 

17,830 

476,849 

1:27 

Mineral  waters(gal.  sold)** 

40,000,000 

Natural  gas  (dollars)  .... 

(1919)  162,000,000 

Petroleum  (gallons)**  .... 

220,951,290 

18,622,884,000 

1:84 

Phosphate  Rock  (long  tons 

4,103,982 

Iron  Ore  (long  tons)**.... 

3,031,891 

69,558,000 

1:23 

Pig  Iron  (long  tons)**.... 

1,665,179 

36,925,987 

1:22 

Steel  (long  tons)**  

68,750 

(1919)  34,671,232 

1 :504 

Total  minerals  (dollars)** 

218,598,994 

6,707,000,000 

1:31 

manufacturing  industries  of  united  states 

Cost  of  material  used(1860)$l,031,605,092 

(1914)  14,368,088,831 

1 :14 

Value  of  products “ 

1,885,861,676 

“ 24,246,434,724 

1 :13 

Manufactures  of  cotton 

(value)  “ 

115,681,774 

“ 701,300,933 

1:  6.1 

Manufactures  of  wool 

(value)  “ 

73,454,000 

“ 464,249,813 

1:  6.3 

Mfrs.  of  silk  (value)..  “ 

6,607,771 

“ 254,011,257 

1:38 

Total  expenses  public 

schools  (1870) 

63,396,666 

(1918)  763,678,089 

1 :12 

•Estimated.  **  Calendar  years. 

a Figures  include  only  about  45%  of  California  crops,  b Approximate. 
Source — Statistical  Abstract  of  the  United  States,  1920. 


Population,  transportation,  other  communication  facilities, 
production,  wealth  and  comforts  have  increased  vastly. 
Schools,  colleges,  libraries,  hospitals,  attention  to  the  sick 
and  poor — all  are  now  on  a much  larger  and  more  construc- 
tive basis. 

This  nation  is  the  leader  of  the  world,  yet  we  have  but 
approximately  6%  of  the  world’s  population. 

We  produce  4 3%  of  the  world’s  coal  and  use  42%. 

54%  of  the  iron  and  use  53%. 

64%  of  the  steel  and  use  57%. 

49%  of  the  copper  and  use  44%. 

64%  of  the  petroleum  and  use  72%. 

69%  of  the  cotton  and  use  37%. 

52%  of  the  timber  and  use  51%. 

41%  of  the  shoes,  and  consume  39%. 

43%  of  the  print  paper  and  use  50%. 

We  have  264,375  miles  of  railroad — 35%  of  all  in  the 
world. 

Sometimes  I hear  young  men  say  that  opportunities  today 
are  not  so  great  as  they  were,  before  the  developments  of 
the  last  fifty  years. 

Let  us  consider  that  thought  for  a moment  and  compare 
certain  large  enterprises  of  the  past  with  several  now  being 
considered  for  the  future. 

Vision  and  Enter-  There  are  two  national  enterprises  which 
prise  Rewarded.  at  their  inception  were  considered  by  some 
more  or  less  daring  and  possibly  foolish. 

Secretary  Seward  purchased  from  Russia  in  1867  for 
$7,200,000  what  is  now  the  Territory  of  Alaska.  Here  is  an 
empire  of  590,884  square  miles,  nearly  one-fifth  the  size  of 
our  United  States.  At  the  time  of  the  purchase,  demagogues 
and  charlatans  attacked  Mr.  Seward.  They  thought  more  of 
their  own  selfish  plans  for  personal  political  advancement 
and  had  no  vision  of  the  great  development  of  Alaska.  Jef- 
ferson, by  the  Louisiana  Purchase  for  $15,000,000  made 
possible  the  continental  United  States.  The  purchase  of 
Alaska  is  second  only  to  that  in  its  territorial  effect  on  our 
nation. 

In  1920  the  value  of  the  fish  from  Alaska  was  $41,- 
492,124.  Gold  was  discovered  there  in  1880  and  up  to 
January,  1921,  a total  of  $320,000,000  had  been  produced; 

5 


of  copper  $127,000,000  and  of  other  metals  $13,000,000, 
total  $460,000,000.  1 here  are  also  very  large  deposits  of 

good  coal  in  Alaska.  Grains,  grasses,  vegetables  and  rein- 
deer are  raised.  Railroad  development  has  been  and  is 
under  way,  as  follows:  555  miles  of  Government  railroad 
with  195.6  miles  of  the  Copper  River  and  Northwestern  in 
operation.  Within  the  next  decade  the  tourist  will  visit  the 
wonders  and  beauties  of  Alaska  as  freely  as  he  now  goes  to 
Norway. 

Another  national  project,  the  Panama  Canal,  was  also 
achieved  only  after  much  political  and  some  economic  con- 
troversy. Up  to  date  the  investment  in  the  canal  is  about 
$375,00°,000  not  counting  interest.  Its  far-reaching  in- 
fluence on  many  phases  of  our  national  life  is  already  felt 
and  will  continue.  True,  the  canal  is  damaging  some  of  the 
transcontinental  railroads  severely  by  tending  to  concentrate 
business  on  the  Atlantic  and  Pacific  coasts  and  thus  drawing 
it  away  from  the  important  Mississippi  Valley. 

But  rates  for  freight  via  the  Canal  and  those  via  the  trans- 
continental railroads  will  be,  in  time,  so  adjusted  that  the 
great  productive  middle  west  will  have  a more  equable  op- 
portunity to  compete  for  the  growing  Pacific  Coast  and 
Oriental  trade. 

It  is  not  a sound  national  policy  to  so  adjust  rates  as  to 
drive  business  out  of  the  Middle  West.  Far  better  to  have 
manufacturing  in  all  sections  of  the  country.  If  the  Govern- 
ment continues  to  make  the  rates  for  freight  carried  by  the 
railroads,  it  should  also  make  them  for  the  freight  carried 
by  ships  through  the  Canal. 

For  the  fiscal  year  ending  June  30,  1923,  3,967  ships  used 
the  Canal,  of  which  1,065  were  British  and  1,994  United 
States;  the  remainder  were  from  18  other  countries.  These 
ships  carried  19,567,875  tons  of  cargo,  of  which  4,929,317 
tons  were  in  British  ships  and  11,055,156  in  United  States 
ships,  the  remaining  tonnage  being  carried  by  ships  from 
other  countries.  The  tolls  paid  were  $4,736,221.04  by 
Great  Britain,  $9,473,819.65  by  the  United  States,  and  the 
tolls  paid  by  other  countries  brought  the  total  up  to  $17,- 
508,199.57.  The  expenses  for  the  year  were  $7,690,777.56, 
leaving  net  revenue  of  ten  million  dollars,  not  counting  in- 
terest. 

From  the  opening  of  the  Canal  on  August  15,  1914,  to 

6 


June  30,  1920,  the  expenses  of  operation  and  maintenance, 
not  including  interest,  were  $36,657,767,  while  the  total  rev- 
enues were  $34,426,675,  leaving  a deficit  for  the  period  of 
$2,231,092,  not  including  any  interest  and  taxes  which  how- 
ever must  be  paid  by  the  railroads  competing  with  the  Canal. 

I mention  these  two  national  enterprises  because  they  are 
now  successful  and  important,  but  when  conceived  were  con- 
sidered by  many  somewhat  visionary.  Plans  for  large  enter- 
prises are  now  being  discussed  which  some  day  will  be  com- 
pleted and  become  important  factors  in  our  national  life,  for 
they  will  open  up  new  opportunities  for  the  present  and  com- 
ing generations.  I mention  a few  of  them. 

The  Super-Power  Phis  system  contemplates  that  within  the 
System  Between  proposed  superpower  zone  all  energy  will 
Boston  and  be  SUpplied  for  municipal,  industrial  and 

Washington.  private  consumers  from  a centralized  net- 

work of  power  generating  and  distributing 
means.  It  is  estimated  that  these  requirements,  exclusive 
of  those  of  possible  railway  electrification,  will  have  in- 
creased from  a total  of  10,000,000,000  kw.  hours  for  the 
year  1919  to  26,000,000,000  kw.  hours  in  the  year  1930. 
Through  the  agency  of  a co-ordinated  power  system  as  pro- 
posed, this  energy  could  be  generated  and  delivered  at  an 
annual  cost  in  1930  of  about  $200,000,000  per  year  less 
than  by  separate  systems  such  as  now  in  use.  This  amount 
represents  the  net  saving  after  paying  fixed  charges  on  the 
additional  capital  expenditure  required. 

These  new  capital  expenditures  would  be  about  $700,- 
000,000  ($693,218,000)  so  that  a very  important  annual 
saving  is  shown  which  may  be  divided  between  the  power 
producing  and  distributing  companies,  and  the  consumers. 

In  addition  to  the  foregoing,  the  superpower  scheme  con- 
templates serving  as  a suitable  power  supply  for  railway 
electrification.  There  are  36,000  miles  of  railway  track 
within  the  superpower  zone  of  which  it  is  estimated  that 
19,000  miles  can  be  profitably  electrified,  so  as  to  yield  by 
1930  an  annual  saving  of  $81,000,000  as  compared  with 
steam  operation.  It  is  estimated  that  the  capital  investment 
for  such  an  electrification  would  be  $570,000,000,  upon 
which  would  be  secured  an  operating  saving  varying  from 
10.6  per  cent  to  19  per  cent,  averaging  14.2  per  cent.  From 

7 


this,  however,  must  be  deducted  fixed  charges  on  the  above 
capital  expenditure. 

This  comprehensive  power  system  is  also  an  important 
means  for  conserving  our  national  coal  resources.  It  is  esti- 
mated that  by  1930  the  coal  saved  annually  under  the  super- 
power system  would  amount  to  about  50,000,000  tons, 
assuming  the  entire  program  is  carried  out.  Of  this  total 
the  savings  are  distributed  as  follows: 


Electric  utilities 19,149,000  tons 

Manufacturing  industries 20,675,000  “ 

Railway  electrification 10,210,000  “ 


The  figures  may  be  too  optimistic  but  the  project  is  an  im- 
portant one  for  the  country  between  Boston  and  New  York, 
Buffalo  and  Washington,  which  will  have  a vastly  increased 
population  before  the  end  of  the  twentieth  century.  Presi- 
dent Coolidge  mentioned  this  subject  in  his  recent  message 
to  Congress. 

The  Great  Lakes — This  is  a great  project,  national  in  its  scope 
St.  Lawrence  Sea-  and  influence.  It  is  a plan  for  a ship  canal, 
Way-  to  be  eventually  30  feet  deep,  between  the 

lower  St.  Lawrence  and  Lake  Ontario,  in 
which  the  United  States  and  Canada  will  have  an  equal  in- 
terest. Incident  to  the  building  of  the  ship  canal  there  is  a 
proposed  development  of  1,460,000  horsepower,  twice  as 
much  as  is  developed  at  Niagara.  The  estimated  cost  is 
$253,000,000  of  which  $150,000,000  is  for  power  and 
$103,000,000  for  the  waterway.  Some  say  that  the  estimated 
cost  is  too  low,  but  the  project  will  be  beneficial  to  New  Eng- 
land and  to  all  the  country  tributary  to  the  Great  Lakes.  It 
will  relieve  congestion  on  the  railroads  reaching  the  upper 
Atlantic  ports  when  population  and  industry  are  twice  what 
they  are  today.  The  project  will  help  coast-wise  trade,  ex- 
port and  import  trade  between  the  middle  western  states  and 
foreign  countries  and  give  great  opportunity  to  our  merchant 
marine  fleet.  The  President,  in  his  recent  message,  thought 
this  project  deserved  the  immediate  attention  of  Congress. 

Undeveloped  You  have  heard  much  about  North  Da- 

Coal  Supply.  kota  lately,  and  Governor  Nestos  of  that 

state  made  a brilliant  speech  at  the  recent 
dinner  of  the  New  York  Chamber  of  Commerce.  In  his 


8 


remarks  the  Governor  pointed  out  the  unlimited  supply  of 
fuel  which  some  day  will  be  of  great  value  in  the  develop- 
ment of  that  state.  There  are  vast  quantities  of  undeveloped 
coal  in  other  states. 

In  Montana,  just  west  of  North  Dakota,  in  one  county 
alone,  about  the  size  of  Connecticut,  there  are  eight  billion 
tons  of  coal.  The  Northern  Pacific  has  in  this  county  10,000 
acres  with  331,000,000  tons  of  coal,  150,000,000  of  which 
can  be  taken  from  open  pit  mines  by  steam  shovels.  That 
company  is  now  arranging  to  open  the  first  mine  and  is 
building  thirty  miles  of  railroad  to  reach  it.  This  will  give 
a supply  of  coal  lasting  from  50  to  100  years  for  all  that 
part  of  the  railroad  between  the  Red  River  and  the  Rocky 
Mountains,  more  than  1,000  miles,  either  for  steam  engines 
or  to  be  used  for  producing  electric  power. 

Water  Power.  The  total  potential  horsepower  to  be  de- 
veloped from  water  power  in  the  United 
States  is  estimated  at  54,000,000  of  which  26,000,000  are 
in  the  states  of  Wyoming,  Montana,  Idaho,  Oregon  and 
Washington. 

At  Priest  Rapids  on  the  Columbia  River  in  Washington, 
plans  have  been  prepared  for  the  development  of  650,000 
horsepower  by  an  investment  of  $100,000,000. 

The  city  of  Seattle  is  now  constructing  a municipal  power 
project  on  the  Skagit  River,  a glacial  stream  from  the  Cas- 
cade Mountains,  125  miles  from  Seattle,  that  will  ultimately 
produce  555,000  horsepower. 

Columbia  Another  project  now  under  consideration 

Riyer  is  that  known  as  the  Columbia  River  Basin 

Irrigation  Irrigation  Project,  in  eastern  Washington, 

which  will  water  1,750,000  acres  of  the 
most  fertile  land  in  the  world  by  gravity  flow  from  the  Pend 
Oreille  or  upper  Columbia  River,  at  a cost  of  $250,- 
000,000. 

General  Goethals  says  of  this  plan: 

“The  Columbia  Basin  project  is  as  much  a national 
one  as  were  the  Panama  Canal  and  the  Alaskan  Rail- 
way and  will,  after  completion,  add  much  more  to  the 
national  wealth  than  either  of  the  others  mentioned.” 


9 


The  proposed  use  of  this  “White  coal’’  now  going  to  waste 
and  the  development  of  the  enormous  dormant  supplies  of 
fuel  in  the  ground  are  only  a part  of  the  projects  under  con- 
sideration. The  development  of  all  this  power  will  be  of 
vast  importance  to  our  growing  population  and  the  success 
of  the  United  States.  These  projects  are  not  more  daring 
or  visionary  than  the  buying  of  Alaska  and  building  the 
Panama  Canal. 

When  Jay  Cooke  was  planning  the  Northern  Pacific  from 
Lake  Superior  to  the  Pacific  Ocean  from  1869  to  1873  he 
was  laughed  at  and  the  empire  he  helped  to  open  up  was  re- 
ferred to  sarcastically  as  Jay  Cooke’s  Banana  Belt!  He 
lived  to  see  his  vision  and  faith  justified.  To-day  the  North- 
ern Pacific — the  pioneer  line  in  the  development  of  the 
Northwest — serves  a populous  territory  producing  nearly 
everything  that  man  needs  except  perhaps  bananas,  oranges 
and  rubber! — a property  worth  to-day  on  any  fair  basis  of 
valuation  more  than  $550,000,000,  and  it  is  only  one  of  sev- 
eral trans-continental  roads,  the  success  of  which  is  necessary 
to  the  whole  country. 

So  young  men  will  have  their  chance — they  will  have 
many,  many  opportunities  to  show  their  ability  and  industry. 

Mother  Shipton’s  In  our  more  youthful  days  most  of  us  read 
Visions.  Mother  Shipton’s  prophecies,  visions,  sub- 

conscious thoughts.  Let  me  recall  a few 
uttered  along  in  1550: 


Over  a wild  and  stormy  sea 
Shall  a noble  sail, 

Who  to  find,  will  not  fail, 

A new  and  fair  countree. 

From  whence  he  shall  bring 

A herb  and  a root 

That  all  men  will  suit 

And  please  both  ploughman  and  king. 

And  let  them  take  no  more  than  measure. 
Both  shall  have  the  even  pleasure 
In  the  belly  and  the  brain. 

Carriages  without  horses  shall  go, 

And  accidents  fill  the  world  with  woe. 

Primrose  Hill  in  London  shall  be 
And  in  its  centre  a Bishop’s  See. 


10 


Around  the  world  thoughts  shall  fly 
In  the  Twinkling  of  an  eye. 

Water  shall  yet  more  wonders  do; 

How  strange,  yet  shall  be  true, 

The  world  upside  down  shall  be, 

And  gold  found  at  the  root  of  a tree. 

Through  hills  men  shall  ride 

And  no  horse  or  ass  be  by  their  side. 

Under  water,  men  shall  walk, 

Shall  ride,  shall  sleep  and  talk. 

In  the  air  men  shall  be  seen, 

In  white,  in  black,  and  in  green. 

Men  shall  walk  over  rivers  and  under  rivers. 

Iron  in  the  water  shall  float, 

As  easy  as  a wooden  boat. 

Fire  and  water  shall  do  more  wonders, 

England  shall  at  last  admit  a Jew. 

The  Jew  that  was  held  in  scorn, 

Shall  of  a Christian  be  born  and  born. 

War  will  follow  with  the  work, 

In  the  land  of  the  Pagan  and  Turk. 

And  State  and  State  in  fierce  strife 

Will  seek  each  other’s  life.  - * 

But  when  the  North  shall  divide  the  South, 

An  eagle  shall  build  in  the  lion’s  mouth. 

All  England’s  sons  that  plough  the  land 
Shall  be  seen,  book  in  hand; 

Learning  shall  so  ebb  and  flow 
The  poor  shall  most  learning  know. 

The  world  then  to  an  end  will  come, 

In  Eighteen  Hundred  and  eighty-one. 

Some  of  these  visions  have  been  realized.  Sir  Walter 
Raleigh  visiting  Virginia  in  1595,  tobacco  and  the  potato 
came  from  there  a few  years  later.  Steam  and  electric  rail- 
roads and  motor  vehicles  have  been  developed  beyond  the 
dreams  of  the  most  sanguine.  The  telegraph,  telephone,  the 
radio  are  here  and  are  almost  commonplace,  although  some 
may  remember  the  old  “devil’s  fiddle”  with  which  we  played 
as  boys,  and  the  first  telephone.  Water  has  been  used  for 
steam  and  electricity  and  its  great  use  for  producing  power 
in  this  country  has  only  begun.  It  is  true  that  in  these  days 
some  think  the  world  is  more  or  less  “upside  down,”  but  it 
is  only  a question  of  time  before  it  rights  itself.  Gold  was 


11 


found  in  California  in  1847  by  Captain  Sutter  at  the  foot  of 
a tree.  The  diving  suit,  the  diving  bell  and  the  submarine 
are  in  daily  use.  Aerial  navigation  is  making  rapid  strides 
and  will  be,  during  this  century,  a factor  in  commercial  and 
social  life.  Iron  and  steel  ships  have  practically  supplanted 
wooden  ones. 

We  have  had  dreadful  wars — Russian,  Turkish,  Balkan, 
United  States,  Japanese,  and  the  recent  Great  War.  Schools 
and  colleges  for  all  sorts  and  conditions  of  people  have  been 
provided.  The  world,  however,  did  not  come  to  an  end  in 
1881.  In  fact  it  really  began  for  me,  as  that  was  the  year 
I received  my  degree  from  Harvard ! 

World  Not  There  are  pessimists — disgruntled  people 

Upside  Down.  — self-seeking  politicians  of  small  vision 
who  say  that  the  world  is  really  “upside 
down”;  that  civilization  is  in  bad  shape  and  going  backward; 
and  declare  we  should  cut  loose  from  present  methods,  our 
Federal  and  state  constitutions,  standards  of  life,  etc.,  which 
have  encouraged  and  developed  our  marvelous  growth.  They 
say : 

“Look  at  conditions  in  Europe.” 

“Look  at  the  upheaval  in  Mexico.” 

“Look  at  the  disturbed  state  of  China.” 

“Look  at  the  pathetic  situation  in  Russia.” 

“What  about  the  farmer?” 

“What  are  you  going  to  do  about  taxes  and  expenses  of 
the  Government?” 

“What  are  you  going  to  do  about  the  railroads?” 
“What  are  you  going  to  do  about  the  relations  of  Cap- 
ital and  Labor?” 

“Look  at  the  Socialists  and  Communists.” 

“Look  at  Congress.” 

“Look  at  the  bootleggers!” 

True,  various  conditions,  situations  and  problems  are 
complicated  and  disagreeable.  They  call  for  the  attention 
of  thoughtful,  earnest  men.  My  own  feeling  is  that  meas- 
ured by  the  life  of  nations,  and  the  fact  that  99  per  cent,  of 
our  people  when  aroused  are  conservative  and  law-abiding, 
these  troubles  and  problems  will  be  overcome  in  a shorter 

12 


time  than  the  pessimists,  the  political  “doctors”  and  trouble- 
makers, the  parlor  theorists  and  demagogues  think.  We  will 
then  march  on  to  a higher  and  better  state  of  human  society 
with  more  constructive  relations  established  between  the 
nations  of  the  world.  I commend  to  some  of  these  “doubt- 
ing Thomases”  this  bit  of  doggerel  which  I read  a few  years 
ago: 

My  grandpa  notes  the  world's  worn  cogs 
And  says  we’re  going  to  the  dogs. 

His  grand-dad  in  his  house  of  logs, 

Swore  things  were  going  to  the  dogs. 

His  dad  among  the  Flemish  bogs, 

Vowed  things  were  going  to  the  dogs. 

The  caveman  in  his  queer  skin  togs, 

Said  things  were  going  to  the  dogs. 

But  this  is  what  I wish  to  state — 

The  dogs  have  had  an  awful  wait. 


We  are  not  going  to  the  dogs,  and  I predict  that  the  next 
twenty-five,  fifty  and  seventy-five  years  will  be  the  most  won- 
derful period  of  the  world  and  the  most  glorious  in  the 
progress  and  history  of  the  United  States. 

The  Railroads,  As  many  of  you  know  I have  always  been 
the  Farmers,  in  the  railroad  business.  I have  just  re- 

Otlier  Problems,  turned  from  an  extensive  trip  in  the  west 
and  northwest,  about  8,500  miles  between 
New  York  and  Puget  Sound  and  the  Pacific. 

I feel  that  I can  speak  of  some  of  the  problems  now  con- 
fronting the  railroads,  the  farmers  and  business  men.  In 
the  first  place,  successful  agriculture  and  adequate  railroad 
service  are  essential.  Both  are  suffering  from  heavy  taxes 
and  what  heretofore  have  been  called  very  high  wages.  The 
condition  of  the  farmer  is  claiming  attention,  for  in  some 
ways  it  is  serious,  but  as  in  nearly  all  serious  situations  there 
is  exaggeration. 

The  wheat  farmers — those  who  depend  solely  on  that 
crop — are  not  in  good  shape  in  North  Dakota,  South  Da- 
kota, parts  of  Minnesota  and  Montana,  and  possibly  in  Kan- 
sas. In  Idaho,  Washington,  and  Oregon  they  are  some- 
what better  off  because  they  have  had  a good  yield.  But  the 
wheat  farmer  is  not  the  only  farmer  in  the  country. 

13 


The  President  deftly  pointed  this  out  in  his  recent 
message : 

“Looked  at  as  a whole  the  nation  is  in  the  enjoyment 
of  remarkable  prosperity.  Industry  and  Commerce  are 
thriving.  For  the  most  part,  agriculture  is  successful; 
eleven  staples  having  risen  in  value  from  about  $5,- 
300,000,000  two  years  ago  to  about  $7,000,000,000 
for  the  current  year.  But  range  cattle  are  still  low  in 
price  and  some  sections  of  the  wheat  area,  notably  Min- 
nesota, North  Dakota  and  on  West  have  many  cases 
of  actual  distress.” 

The  value  of  all  the  grains  produced  in  the  states  of  North 
Dakota,  South  Dakota,  Minnesota  and  Montana  this  year  is 
$502,000,000  and  in  1922  was  $542,000,000 — a decrease, 
hut  not  a failure. 

There  is  already  considerable  diversification  of  crops  in 
these  states  and  the  farmer  is  learning  that  he  cannot  live 
by  wheat  alone.  The  Agricultural  Department  referring  to 
this  subject  in  a recent  bulletin  says: 

“Wheat  has  been  having  a great  deal  of  attention  from 
the  public;  nevertheless  it  does  not  dominate  the  agri- 
cultural situation  as  a whole.  In  general  conditions 
over  the  country  are  somewhat  better  this  season  than 
last.  The  East,  the  South,  the  Corn  Belt,  the  Range 
Country,  and  the  Pacific  Coast  all  show  improvement 
rather  than  otherwise,  both  in  position  as  to  debts  and 
outlook  for  fall  income.  The  Southwest  has  suffered 
from  drought,  as  have  local  sections  in  the  East.  But 
in  the  main  this  is  a pretty  good  crop  year. 

“Summing  up  the  general  situation  it  is  fair  to  record 
improvement  outside  the  Wheat  Belt.  The  wheat  sit- 
uation is  not  to  be  overlooked,  however.  It  is  an  acute 
symptom  of  that  general  and  persistent  maladjustment 
between  the  returns  for  labor  of  country  workers  and 
that  of  urban  workers.  The  purchasing  power  of  farm- 
ers is  still  below  par.  From  that  springs  a broad  under- 
current of  unrest  which  is  still  a factor  to  be  reckoned 
with.” 

Out  of  this  unrest  has  developed  the  “Farm  Bloc”  and 
the  “Farmer-Labor”  party;  and  the  latter  is  a curious  com- 

14 


bination  in  that  the  farmer  wants  lower  costs  for  his  labor 
and  at  the  same  time  lower  prices  for  the  manufactured 
articles  he  buys;  while  labor  wants  lower  prices  for  food 
but  higher  wages  for  work. 

Farmers  Must  There  is  some  evidence  to  show  that  ex- 
Face  Same  Con-  Cept  for  some  wheat  farmers  and  some 
ditions  As  Others.  fruJt  farmers — not  all  of  them — the  farm- 
er is  having  much  the  same  kind  of  ups 
and  downs  experienced  in  all  other  forms  of  human  industry 
since  Armistice  Day. 

The  corn  farmer  is  in  a good  position,  so  is  the  cotton 
farmer,  the  sugar  beet  producer,  and  the  owners  of  hogs  and 
cattle  are  in  better  shape.  In  one  state,  Texas,  the  cotton 
crop  is  estimated  at  4,290,000  bales  with  an  approximate 
value  to  the  producer  of  nearly  $652,000,000  while  the 
wheat  crop  of  the  whole  country  is  estimated  at  785,741,000 
bushels,  worth  approximately  $725,501,000. 

To  help  the  farmer  the  Farm-Bloc-Farmer-Labor  poli- 
ticians propose  to  reduce  railroad  rates  on  agricultural  prod- 
ucts 25  per  cent.  This  would  bankrupt  some  Western  roads, 
stop  dividends  on  others,  and  do  serious  if  not  irreparable 
damage  to  all.  Such  a policy  is  not  sound  because  the  rail- 
roads must  serve  all  the  people.  The  revenues  of  the 
railroads  should  not  be  used  to  make  good  the  losses  of 
farmers  or  any  class  of  our  citizens  resulting  from  over- 
production, errors  of  judgment,  bad  management,  nor  from 
any  cause  for  which  the  railroads  are  in  no  way  responsible. 
Temporarily  there  is  an  over-production  of  oil,  why  not 
reduce  the  freight  rates  25  per  cent,  on  oil  until  the  oil  bus- 
iness is  readjusted,  and  so  on  with  other  commodities?  Ruin- 
ing the  Western  railroads  by  reducing  the  rates  below  a liv- 
ing basis  will  in  the  long  run  hurt  the  farmer  and  the  whole 
country.  He  and  all  in  the  country  want  and  must  have 
service.  Inability  on  the  part  of  the  railroads  to  provide  and 
move  promptly  refrigerator  cars  for  fruit,  box  cars  for  grain 
and  hay,  stock  cars  for  livestock  at  the  time  when  the  mar- 
kets are  ready  to  buy  is  much  more  damaging  to  the  farmer 
than  a difference  of  a few  cents  in  the  railroad  rates  per  hun- 
dred pounds. 

The  Chairman  of  the  Federal  Reserve  Bank  at  Minne- 

15 


apolis  in  an  instructive  paper,  “The  Economic  Position  of 
Agriculture  in  the  Northwestern  Grain  Raising  Area,”  says: 

“The  future  of  agriculture  in  the  northwestern  grain 
raising  area  has  not  been  impaired.  It  has  not  lost  an 
appreciable  percentage  of  its  capable  men.  It  has  been 
undergoing  a drastic  purging  process  involving  the 
elimination  of  the  unfit,  the  deflation  of  excessive  land 
values,  the  collapse  of  credits  built  on  an  unsound  basis, 
the  wiping  out  of  farming  operations  on  marginal  lands, 
and  changes  in  the  type  of  production  and  agricultural 
methods,  which  are  tending  toward  the  establishment 
of  the  business  upon  a sound  basis. 

“Failures,  abandonment  of  land,  foreclosures,  and 
other  results  of  depression  and  distress  in  this  area, 
have  been  given  an  emphasis  out  of  proportion  to  their 
importance.  The  percentage  of  failure  among  the 
grain  raising  farmers  is  not  greater  than  the  percentage 
of  failure  of  banks  in  the  grain  raising  area,  and  is 
approximately  the  same  as  the  mortality  in  commercial 
business  within  the  same  sections.  The  failure  of  those 
in  farming  looms  larger  only  because  the  number  is  far 
greater  than  the  number  engaged  in  banking  or  other 
business  activities.” 

The  Railroads.  Regulating  and  managing  railroads  by 
political  authorities  in  Washington  and  in 
the  various  states  has  been  a favorite  pastime  for  many  years. 

The  Interstate  Commerce  Law  was  passed  in  1887  and 
there  has  been  a constant  increase  in  the  extent  and  detail  of 
regulation  since  then,  both  Federal  and  State.  The  most 
serious  regulation  began  twenty  years  later,  when  the  Hep- 
burn Amendment  gave  the  Interstate  Commerce  Commis- 
sion power  to  suspend  rates,  thus  taking  from  the  railroads 
the  right  to  make  effective  their  prices  or  rates  for  services 
rendered.  This  has  had  a very  serious  effect  on  the  railroad 
business  since  that  time,  and  this  amendment  has  made  it 
difficult  to  obtain  capital.  The  conditions  thus  created  be- 
came so  serious  that  the  matter  was  laid  before  President 
Wilson  in  September,  1914,  who  sent  a message  to  Congress 
December  7,  1915,  which  resulted  in  a joint  resolution  on 
July  20,  1916,  under  which  a prolonged  investigation  was 

16 


made  of  the  whole  railroad  situation.  The  war  intervened 
before  remedial  legislation  growing  out  of  that  investigation 
could  be  passed,  but  later  came  the  Transportation  Act  of 
1920.  That  law  is  not  perfect,  but  it  has  been  helpful  in 
stabilizing  the  credit  of  the  roads.  It  would  be  dangerous 
to  the  people  of  our  country  to  change  it  hastily.  Some  of 
the  roads  in  the  East  working  under  that  Act  have  done 
fairly  well.  We  now  see  the  New  York  Central  trying  to 
obtain  new  capital  through  issuing  stock — a helpful  sign — 
when  one  considers  that  during  the  last  4V2  years  the  new 
money  put  into  the  railroads  has  come,  98.75%  from  loans 
and  1.25%  from  the  sale  of  stock. 

In  the  West  and  the  South  only  a few  roads  have  made 
satisfactory  returns.  The  rate  of  return  of  the  roads  to 
November  30,  1923,  has  been  at  the  annual  rate  of: 


New  England  Region 2.18% 

Great  Lakes  Region 5-44 

Ohio-Indiana-Allegheny 4.94 

Pocahontas  Region 5.72 

Total  Eastern  Region 4.92 

Southern  Region 5.05 

Northwestern  Region 3-4° 

Central  Western  Region 4.53 

Southwestern  Region 3.58 

Total  Western  Region 3.94 

Total  ETnited  States 4.51 


— based  on  Property  Investment  Account  plus  material  and 
supplies  and  working  cash. 

Railroad  Returns  These  returns  are  obviously  not  sufficient 
Insufficient  to  to  attract  partners  or  stockholders  with 
Attract  New  the  new  capital  necessary  for  expanding 

Capital.  railroad  facilities  to  meet  the  growth  of 

the  country.  We  cannot  go  on  indefinitely 
adding  to  our  transportation  system  with  borrowed  money. 

The  late  Interstate  Commerce  Commissioner  Prouty  said 
on  November  19,  1912: 

“It  is  coming  to  be  apprehended  that  in  the  final 
analysis  the  public  pays  the  bill  and  that  it  pays  for  us 

17 


as  railroad  commissioners  to  accord  to  the  railroads 
just  and  fair  treatment.  That,  I say,  is  not  only  de- 
manded by  public  justice,  but  it  is  demanded  by  public 
interest. 

“We  can  make  rates  reasonable,  we  can  remove  dis- 
criminations, we  can  put  on  schedules  for  the  running 
of  trains:  all  that  is  easy.  The  question  is  here,  can 
you  obtain  under  this  system  the  new  money  which  is 
necessary  to  develop  our  old  railroad  system  and  to 
build  our  new  railroad  systems? 

“That  is  the  crucial  question.  That  question  I have 
not  got  to  deal  with,  but  you  younger  gentlemen  with- 
in the  next  twenty-five  years  will  have  it  to  deal  with.” 

He  was  right,  and  one  big  question  before  us  is  how  to 
get  money  for  railroad  development  and  expansion. 

President  Coolidge  said  in  his  recent  message: 

“Unless  the  Government  adheres  to  the  rule  of  mak- 
ing a rate  that  will  yield  a fair  return,  it  must  abandon 
rate  making  altogether.” 

President  Taft  appointed  a commission  to  investigate  this 
subject.  Arthur  T.  Hadley,  head  of  the  commission,  in  sub- 
mitting the  report  of  the  commission,  December  19 n,  said: 

“The  necessary  development  of  railroad  facilities  is 
now  endangered  by  the  reluctance  of  investors  to  pur- 
chase new  issues  of  railroad  securities  in  the  amounts 
required.  This  reluctance  is  likely  to  continue  until 
the  American  public  understands  the  essential  commun- 
ity of  interest  between  shipper  and  investor,  and  the 
folly  of  attempting  to  protect  the  one  by  taking  away 
the  rewards  of  good  management  from  the  other.” 

It  is,  however,  difficult  to  get  certain  Federal  and  State 
legislators  of  the  country  to  realize  these  simple  facts. 

Working  under  the  Transportation  Law  of  1920  the  rail- 
roads are  giving  the  best  and  largest  quantity  of  service  in 
the  history  of  the  business. 


18 


In  eleven  months  the  number  of  freight  cars  loaded  was: 


I92° 41,344,870 

1921  35,918,733 

1922  39,°48,387 

1923  45,^73,69° 


For  the  year  1923  it  is  estimated  the  number  of  cars  loaded 
will  be  49,980,000.  This  is  an  increase  of 

U-75%  over  J922 
26.8  % “ 1921 

101/2  % “ 1920,  the 

heaviest  year  heretofore,  and  12%  over  1918,  when  the 
activities  due  to  the  war  were  very  great. 

Tremendous  With  this  very  large  business  there  has 
Business  Effi-  has  been  no  car  shortage — in  fact,  a slight 
ciently  Handled.  car  surplus.  The  freight  rates  are  lower 
in  this  country  than  in  any  civilized  nation, 
as  per  the  following  table: 


United  States  (per  ton  one  mile) 

1. 1 1 

cents 

England 

4.00 

U 

Sweden 

4.50 

u 

Norway  

5.00 

u 

Brazil 

6.00 

u 

Passenger  rates  for  equivalent  service  are  much  lower 
than  anywhere  in  Europe.  President  Coolidge  says:  “Looked 
at  as  a whole  the  nation  is  in  the  enjoyment  of  remarkable 
prosperity.  Industry  and  commerce  are  thriving.” 

With  these  remarkable  facts  and  results, 
whence  arises  this  agitation  to  dislocate  the 
situation  and  break  down  our  marvelous 
transportation  machine,  so  necessary  to  the 
present  and  future  welfare  of  the  country?  Just  now  the  law 
of  1920  is  being  attacked  because  it  announces  the  principle 
that  rates  should  be  sufficient  to  make  a fair  return  to  which 
the  property  is  entitled  under  the  Constitution.  It  also  pro- 
vides that  the  authority  of  the  Interstate  Commerce  Com- 

19 


Why  This 
Attack  on 
the  Railroads? 


mission  is  controlling  in  conflicts  that  may  arise  over  rates 
made  by  states  and  those  made  by  the  United  States.  This 
is  as  it  should  be.  We  are  a nation,  not  a confederation  of 
states.  This  is  the  so-called  “Guaranty  Clause”  which  is 
no  guaranty,  as  the  results  for  the  year  show. 

The  clause  in  the  law  permitting  consolidations  of  the 
railroads  is  also  being  criticized.  This  clause  as  drawn  is 
rather  difficult  to  make  effective  and  it  would  he  helpful  to 
modify  it  so  that  groups  of  roads  could  consolidate,  subject 
to  the  approval  of  the  Interstate  Commerce  Commission, 
and  not  wait  for  the  nation-wide  plan  proposed  by  the  present 
law.  This  is  a large  country  and  large  transportation  units 
are  desirable.  They  would  produce  ultimately  economies  in 
transportation  and  give  better  service  to  the  public. 

The  clause  of  the  law  that  disputes  about  labor  in  the 
railroad’s  business  shall  be  laid  before  a Labor  Board  and 
adjudicated  by  it,  is  being  criticized  and  attacked  chiefly  by 
those  representing  labor,  but  it  is  desirable  to  have  some 
sort  of  tribunal  to  avoid  conflicts.  In  the  interest  of  all  the 
people  the  strike  must  be  eliminated  from  public  utilities 
and  industries  supplying  society  with  fuel  and  water.  Pub- 
lic opinion  will,  in  time,  establish  the  principle  that  a man, 
who  elects  to  earn  his  living  in  these  callings,  owes  a duty 
to  society,  and  to  the  government  that  protects  him  in  his 
work,  to  give  service  until  by  some  orderly  method  he 
is  relieved  and  the  work  continues  in  the  interest  of  the 
millions  dependent  upon  continuity  of  service  and  supply  of 
necessities. 

Service  from  the  individual  citizen  must  be  given  in  times 
of  peace  as  well  as  in  war.  This  will  be  accomplished 
within  the  lifetime  of  some  of  you,  and  Harvard  men  and 
all  reasonable  men  can  help  to  solve  the  problem. 

Railroad  Another  attack  is  that  made  upon  the 

Valuation.  valuation  of  our  railroads — this  total 

valuation  is  a vital  factor  to  be  considered 

in  rate  making. 

What  is  the  value  of  the  railroads? 

The  so-called  “Radicals”  claim  that  the  total  valuation 
of  our  railroads  upon  which  a fair  return  should  be  made  is 
perhaps  $12,000,000,000;  this  for  the  purpose  of  reducing 

20 


rates,  and  eventually  the  Government  to  buy  the  roads  at  a 
much  reduced  figure.  The  plan  means  confiscation. 

Here  are  a few  figures  which  laymen  and  Congressmen 
should  understand: 

(a)  400,000  miles  of  track  at  only  $25,000  a mile  (a  very  low 
estimate).  The  Department  of  Agriculture  estimates 
that  the  average  cost  of  a mile  of  improved  highway 
today — which  has  no  rails,  ties,  tunnels,  trestles,  and 

relatively  infrequent  bridges — is  about  $36,000 $10,000,000,000 

(a)  69,000  locomotives  at  only  $20,000  each.  The  6,000  or 
more  locomotives  bought  in  the  last  two  years  have 
cost  an  average  of  about  $60,000  each,  and  some  have 

cost  as  much  as  $75,000  or  $100,000 

(a)  2,400,000  freight  cars  at  only  $1,000  each.  The  average 
cost  of  a freight  car  today  is  about  $2,500.  Many  re- 
cently put  in  service  cost  $3,000,  and  refrigerator  cars 

$3,500  each  

(a)  57,000  passenger-train  cars  at  only  $10,000  each.  All- 
steel  passenger  train  cars  now  cost  from  $30,000  to 

$35,000  each  

Materials  and  Supplies.  Railroads  have  to  keep  on  hand 
millions  of  tons  of  coal,  rails,  ties,  spikes  and  all  other 

material  required  in  maintenance  and  operation 

Working  capital  

50,000  Stations  and  Terminals,  Yards,  Signals,  Roundhouses, 

Shops,  Machinery,  Water  Supply,  Power  Plants, 

Elevators,  Docks,  Coal  Pits,  and  all  other  items,  in- 
cluding administration  in  over  1,000  cities  and  towns, 
stations  and  terminal  facilities  cost  over  a million  dol- 
lars apiece.  These  facilities  in  a few  of  our  larger 
cities  would  alone  account  for  over  a billion  dollars 

a year  

The  above  property  is  believed  to  be  worth  fully  $10,000,- 
000  and  could  not  be  duplicated  for  anywhere  near 
that  amount  today. 


This  totals  $22,350,000,000 

— and  a valuation  recognizing  all  the  elements  of  value 
assured  to  the  ordinary  property  owner  would  be  far 

in  excess  of  this  amount,  probably $30,000,000,000 

(a)  These  are  Interstate  Commerce  Commission  figures  in 
round  numbers. 


1.380.000. 000 

2.400.000. 000 

570.000. 000 

500.000. 000 
500,000,000 

7.000. 000.000 


The  Interstate  Commerce  Commission  found  the  tenta- 
tive value  of  the  railroads  on  December  31,  1919,  to  be 
$18,900,000,000.  This  valuation  was  based  on  costs  and 
prices  up  to  1914,  and  therefore  includes  no  war-time  infla- 
tion of  values.  The  subsequent  investment  of  approximately 
$1,984,683,000  (1923  estimated)  brings  the-  Interstate 


21 


Commerce  Commission  valuation  for  rate  making  purposes 
as  of  the  end  of  this  year  up  to  $20,884,683,000. 

Every  thinking  man  should  judge  for  himself  of  the  fair- 
ness of  the  contention  made  by  Senators  La  Follette,  Brook- 
hart  and  others  that  the  Interstate  Commerce  Commission 
valuation  should  be  reduced  by  from  $7,000,000,000  to 
$10,000,000,000.  Such  a confiscation  of  values  would  be 
in  effect  a denial  to  the  railroads  of  their  chief  means  of 
keeping  pace  with  the  development  of  the  country  and  force 
Government  ownership  of  the  railroads — something  which 
the  people  do  not  want.  Fair  recognition  of  railroad  prop- 
erty values  is  essential  for  adequate  earning  power  and  credit 
for  further  expansion  in  the  interest  of  all  the  people. 

When  you  realize  that  Life  and  Fire  Insurance  Com- 
panies and  Savings  Banks  and  eleemosynary  institutions  hold 
a very  large  amount  of  railroad  bonds,  that  an  adequate 
and  expanding  railroad  system  is  absolutely  necessary  to 
the  future  growth  of  the  country,  you  will  appreciate  how 
dangerous  is  the  attack  now  being  made  on  the  valuation 
of  our  railroads.  The  railroads  represent  on  any  fair  basis 
of  value  at  least  one-twelfth  of  the  national  wealth.  To 
destroy  that  amount  of  the  nation’s  property,  all  or  in  part, 
by  adverse  legislation  is  an  economic  injustice. 

All  thinking  men  should  do  all  in  their  power  to  prevent 
this  economic  injustice  in  the  interest  of  all  the  people  of  our 

Finally,  it  is  interesting  to  note  that  if 
the  railroads  of  the  United  States  had 
received  the  same  average  rate  for  freight 
in  1923  as  in  1921,  the  freight  bill  of  the 
country  for  1923  would  have  been  about 
$700,000,000  larger  than  in  1921.  In  other  words,  the 
railroads,  through  their  efficiency  and  success  in  providing 
a national  service  of  the  highest  character  have,  in  spite  of 
very  high  wages  and  high  costs  for  fuel,  materials  and  sup- 
plies, transported  the  largest  business  ever  handled  and  at 
the  same  time  made  a saving  to  the  freight  payers,  com- 
pared with  the  1921  basis,  of  at  least  twice  the  saving  in 
taxes  proposed  by  the  national  Administration.  Unfortu- 
nately, the  saving  has  been  too  great;  that  is,  the  rate  basis 
is  too  low  to  attract  capital  so  as  to  prepare  for  the  future. 


country. 

Freight  Rates 
Reduced  More 
Than  Proposed 
Tax  Reduction. 


22 


Expenses  and  Out  of  our  great  prosperity,  together  with 

Taxes.  our  easy-going  methods  of  selecting  our 

- governmental  servants,  the  habit  of  expect- 

ing the  Government  in  some  way  to  cure  by  legislation 
economic  failures  due  in  many  cases  to  individual  mistakes; 
and  out  of  the  necessity  of  prompt  action  during  the  war, 
regardless  of  cost,  has  developed  a money-spending  and  a 
money-wasting  habit  in  this  country  which  is  piling  up  taxes 
and  diverting  to  luxuries  too  much  capital  and  savings  from 
very  necessary  uses. 

Large  Expense  It  is  estimated  that  there  are  about 
of  Government.  3,366,000  persons  in  the  country  who  are 
supported  wholly  or  in  part  by  the  Gov- 
ernment, receiving  $3,820,000,000  per  year.  The  follow- 
ing from  a research  report  by  the  National  Industrial  Con- 
ference Board  is  pertinent: 

“When  it  is  appreciated  that  one  in  every  twelve 
persons  sixteen  years  of  age  or  over  who  was  gain- 
fully employed  in  1920  is  on  the  public  payroll,  the 
time  should  appear  to  be  propitious  for  inquiring 
whether  the  community  is  receiving  a full  return  for 
the  outlays  involved.  The  total  amount  disbursed 
annually  on  account  of  personal  services  in  behalf  of 
federal,  state  and  local  governments  represented  6.5% 
of  the  entire  national  income  in  1922  and  was  4 6% 
of  the  amount  paid  out  in  wages  by  all  the  manufac- 
turing plants  of  the  country,  the  value  of  whose  prod- 
ucts exceeded  $5,000  in  1921.  The  annual  cost  of 
salaries  paid  directly  to  active  and  inactive  Govern- 
ment employees,  exclusive  of  materials  and  other  ser- 
vices purchased  by  public  agencies  and  of  wages  paid 
on  contract  work,  is  $34  for  every  man,  woman  and 
child  in  this  country,  and  $91  per  person  over  ten  years 
of  age  gainfully  employed,  who  comprise  in  the  last 
analysis  the  large  body  of  taxpayers  of  the  nation. 
Outlays  running  into  stupendous  figures  as  above  indi- 
cated are  worthy  of  careful  study  with  a view  of  rigor- 
ous retrenchment  in  public  expenditures,  to  elimination 
of  waste  and  duplication  that  still  exist  in  our  public 
economy  and  to  a reduction  of  needless  functions  and 
services  that  may  still  be  found.” 

23  ' 


Consider  how  governmental  debts  of  all  kinds  have  in- 
creased since  1890.  Municipal,  county,  state  and  federal 
debts  compare  as  follows: 

1890  '....$  1,836,000,000 

1902  2,880,000,000 

1913  5,146,000,000 

1923  32,268,000,000 

But  leaving  out  the  great  increase  in  the  national  debt 
because  of  the  war,  the  increase  in  state  and  municipal  debts 
is  from  $1,224,000,000  in  1890  to  $10,500,000,000  in 
1923. 

Are  We  too  We  want  all  kinds  of  luxurious  county 

Extravagant?  and  municipal  improvements — want  them 

right  away — forgetting  the  tax  burdens 
and  the  maintenance  costs  that  are  piling  up  for  those  who 
come  after  us  and  which  put  onerous  burdens  on  our  present- 
day  people  and  industry.  My  recent  trip  included  part  of 
central  Oregon.  In  one  county  in  the  state  about  twice  the 
size  of  Rhode  Island,  there  are  only  3,400  people,  but  in 
the  desire  to  emulate  more  thickly  settled  communities,  good 
roads,  fine  court-houses,  elaborate  schools,  irrigation  proj- 
ects, a local  railroad,  etc.,  have  been  built  so  that  the  taxes 

are  $345,000  a year.  This  is,  no  doubt,  an  extreme  case, 

but  all  over  the  country  communities  and  municipalities  are 
issuing  tax-free  bonds  and  making  improvements  too  rap- 
idly, and  the  burden  on  individuals,  agriculture  and  business 
is  too  heavy. 

Mr.  Mellon  points  out  some  of  the  evils  of  the  enormous 
expenditures  by  municipalities: 

“T  he  high  rates  put  pressure  on  taxpayers  to  reduce 
their  taxable  income,  tend  to  destroy  individual  initia- 
tive and  enterprise,  and  seriously  impede  the  develop- 
ment of  productive  business.  Taxpayers  subject  to 
the  higher  rates  cannot  afford,  for  example,  to  invest 
in  American  railroads  or  industries  or  embark  upon 
new  enterprises  in  the  face  of  taxes  that  will  take 
50  per  cent  or  more  of  any  return  that  may  be  real- 
ized. These  taxpayers  are  withdrawing  their  capital 

24 


from  productive  business  and  investing  it  instead  in 
tax-exempt  securities,  and  adopting  other  lawful  meth- 
ods of  avoiding  the  realization  of  taxable  income. 
The  result  is  to  stop  business  transactions  that  would 
normally  go  through,  and  to  discourage  men  of  wealth 
from  taking  the  risks  which  are  incidental  to  the  devel- 
opment of  new  business.” 

The  country  justly  applauded  the  efforts  of  Mr.  Harding 
to  bring  to  a final  conclusion  the  budget  plan.  It  is  now 
applauding  the  President  and  Mr.  Mellon  for  their  earnest 
efforts  to  reduce  taxes  by  an  amount  estimated  at  $323,- 
000,000  per  year,  and  for  rigid  economy  under  the  budget 
system. 

Right-thinking  people  hope  Congress  will  give  effect  to 
the  recommendations  of  the  President  and  the  Secretary  of 
the  Treasury  and  that  this  good  example  will  be  followed 
by  all  states,  counties,  and  municipalities. 

We  have  an  army  of  office-holders  living  on  us,  a con- 
stant elaboration  of  governmental  machinery  and  an  alarm- 
ing increase  in  federal,  state,  county  and  municipal  taxes. 

Future  Develop-  There  is  no  limit  to  the  material  develop- 
ment Unlimited,  ment  possible  in  the  United  States,  Mex- 
ico, South  America,  China,  Russia  and 
Africa  during  the  Twentieth  Century.  I 
have  just  returned  from  a trip  of  a month  from  New  York 
through  Minnesota,  North  Dakota,  Montana,  Idaho,  Wash- 
ington and  Oregon.  Beautiful  and  fertile  prairies  and  val- 
leys, magnificent  forests,  vast  plains,  great  rivers,  populous 
and  industrious  cities  with  churches,  schools  and  colleges, 
countless  towns  with  neat  homes,  unsurpassed  natural  scenery. 
Ours  is  the  best  country  in  the  world.  But  all  citizens,  men 
and  women,  must  do  their  part  to  keep  it  so.  The  educated 
man,  the  Harvard  man,  must  take  part  not  only  in  the  great 
material  development  of  the  Twentieth  Century,  but  must 
take  a greater  part  in  the  moral  and  human  work  incident  to 
governing  the  world  aright. 

The  English-speaking  nations  should  join  in  building 
foundations  for  peace  and  in  the  elimination  of  the  waste  of 
man  power  that  comes  from  incessant  conflict. 

Harvard  men,  all  educated  men,  should  take  a greater 

25 


part  in  selecting  those  that  make,  administer  and  interpret 
the  laws  affecting  our  daily  lives. 

All  should  stand  strongly  for  the  Constitution  of 
the  United  States  and  against  the  pernicious  doctrines  and 
insidious  work  of  Socialists,  Communists  and  the  Soviet 
sympathizers,  who  are  not  true  Americans. 

All  should  practise  prudence  and  thrift  and  self  denial  in 
personal  and  governmental  life  and  make  good  the  ravages 
of  the  great  war. 

“Service”  must  be  given  by  each  one  of  us  not  only  to 
ourselves,  our  families  and  business,  but  to  society  as  a 
whole.  We  must  not  shrink  from  giving  it  to  the  best  of 
our  ability. 

Each  one  of  us  can  “go  forth  to  meet  the  shadowy  future 
without  fear  and  with  a brave  and  manly  heart.” 

With  the  material,  moral  and  human  forces  of  the  world 
directed  aright,  civilization  will  not  go  backwards  but  for- 
ward. ■ Harvard  men  can  and  will  do  their  share. 


26 


